The problem could be caused by the codec your using to decode your movie. Does the codec your using support the use of B-frames? I would suggest looking for a codec that has that option. LOL Im really only guessing here and i might be way off on my answer but then again maybe im right. Also you might want to scan the movie for bad frames with vdubmod.

I have already encoded the DVD using xvid release 24/06/2003. The encode went fine in VDub but then when merging the 2 streams in VDubMod it comes up with that problem, even though I'm just using Direct Stream Copy